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Economics > Unit 2(2.1-2.6) > Flashcards

Unit 2(2.1-2.6) Flashcards

1
Q

What is Microeconomics

A

the allocation of resources within specific markets

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2
Q

what is macroeconomics

A

It refers to the allocation of resources within the economy as a whole(multiple markets)

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3
Q

What are markets made of

A

demand and supply.Price adjusts to reach an equilibrium between both

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4
Q

what is equilibrium

A

when at a given price, the quantity supplied equals the quantity demanded

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5
Q

What is disequilibrium(Surplus and Shortage)

A

Surplus: when the quantity demanded is greater than the quantity supplied
Shortage:when the quantity supplied is greater than the quantity demanded

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6
Q

what is the price mechanism

A

the process where the price adjusts to bring equilibrium in a market

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7
Q

what does the price act as in a market

A

an incentive to producers to produce more or less
a signal to other producers to enter or exit the industry
a rationing device(it affects the quantity demanded

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8
Q

what happens if demand rises in a market

A

the price will rise. This will:
act as an incentive for existing producers to produce more
encourage other producers to enter the market
reduce the quantity demanded

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9
Q

What does a demand curve show

A

shows the quantity consumers are willing to buy at each price

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10
Q

influences on demand(except for price)

A

prices of other goods and services
income levels
marketing activities of the business
size of the buying population

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11
Q

what is a contraction in a demand curve

A

when the price rises and there is a decrease in the quantity demanded

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12
Q

what is an extension in a demand curve

A

when the price falls and there is an increase in the quantity demanded

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13
Q

the 3 economic questions

A

what to produce,how to produce and for whom

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14
Q

when does a shift in demand occur

A

occurs due to a change in factors other than price.

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15
Q

what is a shift in demand

A

there is a change in quantity demanded at each price

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16
Q

what causes an outwards shift in demand

A

more effective marketing
increase in income( only for normal goods)
an increase in the price of a substitute
a decrease in the price of a complement(consumer needs both the products)

17
Q

what causes an inward shift in demand

A

a reduction in marketing activities
a decrease in income
a decrease in the price of a substitute
an increase in the price of a complement
a decrease in the market size( fall in the number of buyers)

18
Q

what is an individual demand curve

A

shows the quantity an individual consumer is willing and able to buy at each price

19
Q

what is a market demand curve

A

shows demand for the market, constructed by adding together the quantity demanded by all the different consumers

20
Q

What does a supply curve show

A

shows the quantity that producers are willing and able to produce at each and every price

21
Q

factors that affect supply

A

the number of producers
the cost of resources(such as material and labor
state of technology
the way in which work is organised and managed
taxes on producers or subsidies for producers

22
Q

what causes an extension in supply

A

a rise in price which increases the quantity supplied

23
Q

what causes a contraction in supply

A

a fall in price which reduces the quantity supplied

24
Q

what causes an outward shift in supply(Increase)

A

more producers
lower costs
better technology
more capital equipment

25
Q

what causes an inward shift in supply(decrease)

A

fewer producers
higher costs
poorer working methods
less capital equipment

26
Q

what is an individual supply curve

A

shows the quantity an individual producer is willing and able to produce at every price

27
Q

what is a market supply curve

A

adding together the quantity supplied by all the different producers

28
Q

what direction is a demand curve

A

downward sloping

29
Q

what direction is the supply curve

A

upward sloping

30
Q

what happens in a shortage

A

when the quantity demanded is greater than the quantity supplied.Price will then increase which reduces quantity demanded and increases quantity supplied until price equilibrium is reached

31
Q

What happens in Surplus

A

when the quantity supplied is greater than the quantity demanded. Price will fall which reduces the quantity supplied and increases the quantity demanded until equilibrium is reached

32
Q

what does an indirect tax do

A

increases producer costs and shifts supply inwards

33
Q

what does a subsidy do

A

reduces producer costs and shifts supply inwards

Economics (9 decks)

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